Buying and owning a property in Bulgaria is associated with paying relevant taxes just like when buying a property in the UK or any other country. When buying a property in Bulgaria, buyers needs to be aware that they are obliged to pay taxes in relation to both the acquisition of the property (property transfer tax) and the continual ownership of the property (annual property tax, rubbish tax) as well as tax on any income derived from this property (income tax).
With signing the Notary deed – the title deed for ownership of the property - the buyer becomes the full owner of the property and assumes all related rights and obligations. By signing of the Preliminary contract the buyer has only the right to receive the ownership over the property when all the installments have been transferred to the seller, but the seller remain the owner of the property till signing of the Notary deed for transferring the ownership.
I. Upon signing this ownership document the buyer is obliged to pay property transfer tax to the amount of 2 % to 4% of the value of the property to be purchased depending on the policy of each municipality (usually the tax rate is 2,5 %). For example, if the purchase price of the property is EUR 100 000 EUR and the tax rate is 2,5 % of EUR 100 000, the property transfer tax will amount to EUR 2500. Upon signing the Notary deed the buyer is also obliged to pay Notary fee according to the prescriptions of the Notary and the Notary Activity Act (NNAA). The exact amount of the notary taxes is defined in Notary Taxes Tariff as follows: Certified material interest in BGN Notary fee in BGN
Under 100.000 - 15.000 BGN
From 100. 001 to 1,000.000 15.000 plus 1.5 % for the amount over 100.000
From 1,000. 001 to 10,000 28.5 plus 1 % for the amount over 1, 000
From 10,000. 001 to 50,000 118.5 plus 0.5 % for the amount over 10, 000
From 50,000. 001 to 100,000 318.5 plus 0.2 % for the amount over 50, 000
Over 100,000 418.5 plus 0.1 % for the amount over 100,000 but less than 3,000
The VAT due is 20 % after the paid taxes and fees for the transfer have been discounted.
There is no VAT on land transfer deals. Upon signing the Notary deed the buyer pays Land registry fee of 0.1% of the price of the property the total amount for which is roughly 1% of the price of the property. Thus the total transfer expenses related to the purchase of a property are approximately 3% of the price of the property and include the property transfer tax, the Notary fee and the Land registry gee.
All above stated fees could be divided between the seller and the buyer if it is stipulated in the Preliminary contract or in an appendix, which shall be non separated part of the preliminary contract.
In relation to their ownership of property in Bulgaria, foreign nationals and foreign legal entities who acquire real estate in Bulgaria are obliged to register at the Registry Agency under the registration system BULSTAT for issuance of an identification number within seven days as of acquiring of the property. The application for registration is to be submitted at the Registry Office in the region where the real estate is located. In addition to that they need to register the property in the Local Municipality and the Local Tax office.
For your convenience, we are mentioning all necessary documents for the notary procedure:
1.Draft notarial deed for transfer of property
2.Documents identifying the participants in the proceedings
3.Letter of authorization if agent represent one of the parties
4.Documents certifying the property right
5.Declarations by the parties certifying their civil, marital and property status
6.Declaration by the person who acquire the property certifying the origin of the funds, in case the value of the estate is over 15000 euros
7.Declaration by the interpreter that his translations are reliable
8.Certificate for tax assessment and paid taxes
9. Receipt for paid local tax for acquisition of real estate
II. After the buyer is already the owner of the property by signing of the Notary deed for the title, every year the owner is obliged to pay annual property tax, including council tax and tax for the rubbish. The size of these annual taxes is determined by the tax experts each year and depends on the size and the location of the property as well as on other factors.III. If an owner is renting their property and deriving income from it, they are obliged to pay income tax in Bulgaria which will be different depending for instance on how the property is owned – whether by a physical person or by a company.If the buyer rent the property as physical person, they will be paying a tax calculated on a scale as per the new Law on the Income of the Physical persons, after a legal allowance of 20% of the profit is deducted. Thus the owner is paying tax according to the mentioned formula on 80% of the profit.If the property is owned trough a company, a corporate tax of 10% will be paid. If a buyer wishes to purchase more than two properties and develop investment business in Bulgaria, we normally advise them to buy the properties trough a company as it is more tax effective to do so and they will need an active company for their business purposes. If a buyer decides to sell their property, provided they sell one property in one tax year, they will pay no capital gains tax. After 5 years of the acquisition of the property, they may sell two or more properties without paying capital gains tax.

This article details the purchase procedure for buying a home in Bulgaria, which is slightly different from that in most Western countries. Although relatively straightforward, the procedure isn’t without potential problems and it’s therefore highly advisable to engage a lawyer who’s familiar with it before paying any money or signing a contract.



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Once you’ve found a home you plan to buy and agreed the selling price, you will need to take the following steps:

If the property has land (i.e. is anything other than an apartment), form a limited company.
Sign a preliminary contract and pay a deposit.
Sign the notary act and make the final payment.
The buying process is generally straightforward and is often completed within a month.

Forming a company
If you’re purchasing a property that has no land attached (i.e. an apartment or flat) you don’t have to form a limited company; otherwise, you must do so. Bulgarian law currently forbids foreigners from owning land in Bulgaria and the only way around this is to form a company, registered in Bulgaria. This is not illegal or a ‘tax dodge’ but an accepted and recognised practice.

The requirement will change once Bulgaria joins the EU, which is scheduled for 2007. According to the latest government information, citizens of EU countries and citizens of non-EU countries that have reciprocal agreements with Bulgaria on land ownership will be allowed to buy land without restriction. Other foreigners will have to wait at least another five years (i.e. until at least 2012) before the requirement to form a company will be lifted.

Normally, you must go to a notary public’s office to sign the requisite documents, but most estate agents can organise company registration for you or you can use the services of a local lawyer, although this requires you to set up a power of attorney (see below).

Payable fees & requirements
The process of registering a limited company can take a single day or several weeks but normally takes between three and four weeks, so you should allow at least this amount of time between signing the preliminary contract and completion. The cost of registration currently varies between regions, ranging from around €500 to around €750.

The minimum amount of capital required to set up a company is 5,000 lev (€2,500), although you usually need to deposit only 70 per cent of this amount, i.e. 3,500 lev (€1,750). This isn’t the cost of setting up a company but the amount that must be deposited into a bank account in order to set up a company. Once the company has been formed, you can access the money.

You must give your company a name (which will have the suffix ‘OOD’, equivalent to Ltd in the UK or Inc. in the US), determine a registered office address and appoint directors/shareholders. These are normally the buyers themselves, e.g. a husband and wife, although you should check the tax, inheritance and other implications of your choice of shareholders.

If you’re a non-EU citizen, your company must employ at least ten Bulgarians, although this can be on a part-time or occasional basis. Following protests by the EU, this requirement was dropped for EU citizens.

Your company must be registered with the National Insurance Institute (NOI) within seven days of its formation and with the local tax authority within 14 days. You will receive confirmation of the company’s registration, a tax registration card (with the company’s tax numbers on it) and a stamp to be used on all official documents.

At the end of the financial year (March) you will need to file an annual tax return for your company. In almost every case your account will be ‘zero’ (i.e. no trading for the entire year). Nevertheless, unless you can read and write in Bulgarian and are familiar with the Bulgarian tax system, you will need a lawyer to ensure that your tax return is filled out correctly; he shouldn’t charge more than 100 lev (€50).

Power of attorney
Many people are unable to be in Bulgaria for the whole of the purchase process, particularly those buying a holiday home or investment property. If this is your case, you can give power of attorney to your lawyer or estate agent to handle the formation of a limited company and/or the purchase of a property. If you need to provide power of attorney to anyone, it’s essential that you know exactly what it authorises.

Power of attorney can allow unscrupulous people to withdraw money from your bank account without your permission, buy and sell property without your knowledge and commit you to unfavourable contracts.

You can prevent such eventualities by stating exactly what your power of attorney permits and forbids and by setting a time limit for its applicability.

Usually power of attorney allows your lawyer to establish a limited company for you and deposit the initial capital in the account, then pay any fees and withdraw money for the final payment. You can also provide power of attorney to your estate agent to withdraw money from your account to pay a deposit on the property.

You may be sent documents for the provision of power of attorney by your lawyer or an estate agent in your home country. For these to be binding legal documents, you must normally sign them in front of a witness (usually a notary public or lawyer) and pay a fee.

SURVIVAL TIP
If you plan to retire to Bulgaria , it’s often wise to provide power of attorney to a member of your family or trusted friend to look after your financial affairs if you’re no longer able to do so.

Preliminary Contract
The first stage in buying a home in Bulgaria is the signing of a preliminary contract. Your lawyer is responsible for ensuring that this is drawn up correctly and you shouldn’t rely on an estate agent to do so.

While some agents or developers will provide a properly-drawn up contract, some won’t – and unless you’re a Bulgarian-speaking lawyer you won’t be able to tell which is which! For peace of mind it’s recommended that you have the contract drawn up or at least checked by a Bulgarian lawyer.

There are a number of types of preliminary contract, depending on whether you’re buying an existing (built) property or a new property off plan (i.e. yet to be built or under construction).

Signing the Notary Act
Signing the notary act (sometimes referred to as the notary deed, purchase contract or final contract, which is equivalent to a title deed) is the final step in taking ownership of your property. If you’re unable to be present at the signing, you can have your agent or lawyer sign it on your behalf if you’ve given him power of attorney.

SURVIVAL TIP
You should always sign the notary act in person if you’re buying a brand new or off-plan property, to make sure that all the requirements of the preliminary contract have been met.

The signing of the notary act takes place in front of a notary public, who first checks that all the conditions contained in the preliminary contract have been fulfilled. It’s normal for all parties concerned to be present when the final contract is read, signed and witnessed by the notary, including the estate agent, developer (for new or off-plan property), your lawyer and your translator.

Either party (buyer or seller) can give a representative power of attorney. In the case of an off-plan purchase, the final contract isn’t signed until building is complete.

Payment
To make payment of the final amount to the seller it’s preferable to have a bank account in Bulgaria. That way you can transfer the money from your home country to your Bulgarian currency (or local euro) account and withdraw it when you’re in Bulgaria. It isn’t advisable to carry large amounts of cash into Bulgaria (or anywhere for that matter!) and you must declare any amount over 8,000 lev (€4,000) in cash or its equivalent.

Most sellers will be unwilling to accept a payment from your home bank account, as they will usually have to pay a fee for receiving a foreign currency and may be at the mercy of foreign exchange rates. Some sellers will ask for the final payment in cash (usually for smaller amounts), but most will accept payment in the form of a bank transfer, telegraphic transfer or bank draft from a Bulgarian account.

If you cannot be present at the signing of the final contract, you can authorise your lawyer or another agent to transfer the money on your behalf (see Power of Attorney above). In the case of an off-plan purchase, payment is made in stages.

The gross annual rental income, expressed as a percentage of property purchase price. This is what a landlord can expect as return on his investment before taxes, maintenance fees and other costs.

The properties are 120-sq. m. apartments located in premier city centres. (See our list of premier cities)

The gross rental returns (or rental yields) figures published by the Global Property Guide are based on the Global Property Guides own proprietary in-house research.

Only resale apartments and houses are researched. Yields for newly-built properties are not included.

Buyers should expect the rental yields of new properties to be lower than the gross rental yields published by the Global Property Guide.

Properties will be in excellent condition, with good facilities, and have been refurbished or redecorated within the last five years.

When was this data collected? Click on individual countries to see the data collection date.

Low taxes in Bulgaria

INDIVIDUAL TAXATION
Nonresidents are liable to pay tax on their Bulgarian-sourced income. Joint taxation is not allowed and married couples are taxed separately.

INCOME TAX
Income earned by nonresidents is taxed at a flat rate of 10%. Deductions are not allowed for nonresidents.

RENTAL INCOME
Tax on gross rents payable to nonresidents is withheld at source at 10%. Tax due must be remitted monthly unless a tax treaty between Bulgaria and the foreign country exists whereupon tax may be remitted quarterly.

CAPITAL GAINS
Capital gains realized by nonresident individuals from the sale of Bulgarian property are taxed at 10%. The taxable capital gains is computed by deducting the inflation-adjusted acquisition price or the taxable value of the property for the purpose of real estate tax, whichever is higher, and incidental expenses (maximum of 10% of the selling price or fair market value of the property).

The following capital gains are exempt from taxation:

Disposal of one residential property, provided that the property was held for more than three years before it was sold
Disposal of a maximum of two real estate properties, provided that the property was held for more than five years before it was sold

Capital gains derived from the sale of properties acquired by inheritance are not subject to tax. Capital gains derived from the sale of properties received as gifts are taxed on the gross receipts because the acquisition price of the donation is deemed to be zero.

VALUE ADDED TAX(VAT)
Land transaction sales and leasing residential properties are exempted from VAT.

PROPERTY TAX
 

Real Estate Tax
Owners are liable to pay real estate tax on their Bulgarian property. The tax base is the assessed value of the property as calculated by the local tax authorities. The tax rates are set by the municipalities where the property is located and may vary between 0.1% and 0.45%.

CORPORATE TAXATION
INCOME TAX
Income and capital gains by corporations are taxed at a flat rate of 10%. Income-generating expenses are deductible in computing taxable income. Corporate income tax must be remitted on or before 31 March of the succeeding year.

When buying a property in Bulgaria it is good to know in advance what kind of documents are needed. This will save some time and will make the process faster and easier. There are a few groups of documents: identifying the buyer, identifying the property, identifying the seller and identifying the future deal.

The documents identifying the buyer start with a copy of ID card or passport but this is not all. The buyer should present to the notary a declaration of citizenship and civil status, declaration for the absence or presence of tax obligations (it is best to pay your taxes and show that you don’t owe anything to the state). Another important document that the buyer should present at the notary is a declaration of intent for the purchase of the property. It must indicate the type of property, its location, the method of acquisition etc. In most of the cases the buyer and the seller use the so called preliminary agreement. It is a contract that has all the basic elements of the final contract for the purchase: the seller and the buyer, the property, the price, the terms etc. This preliminary agreement does not transfer the ownership of the property. It is only a promise that a final agreement will be signed in the future, usually within 45-days period. The preliminary agreement must be in writing and upon signing it the buyer pays a deposit to the seller which is usually 10% of the property value. The obligation of the seller after the signing of the preliminary agreement is to supply all the necessary documents for the purchase of the property.

The first and most important document that the seller should present is the document that shows he is the owner of the property. This is usually the title deed. Another obligation of the seller is to take a tax evaluation certificate for the property. This document is issued by the tax authorities at the location of the property. The tax evaluation certificate contains the names of all of the property owners and it must show that there are no debts for the property (the local tax and garbage collection fees must be paid). The tax evaluation certificate is valid for 6 month, so make sure you check the dates of the certificate.

Another document that is 6 months valid and is presented by the seller is a sketch of the property. It has to show the property that is being sold.

The seller must present a certificate of their marital status. If he or she is married, their spouse should sign a declaration of consent for the purchase of the property. One of the most important documents during a property deals in Bulgaria is the certificate of encumbrances. It is issued by the Registry agency and is applied to all the title deeds of the property. The certificate of encumbrances shows all the deals made with that property and can prevent frauds.

All those documents should be prepared by the buyer and the seller of the property and must be presented at the notary in order to proceed with the deal. The notary will check and compare the information in the documents. According to the Bulgarian law if the payment is greater than 7500 euro, it should be made through a bank transfer. The buyer must present to the notary a bank document proving that the transfer for the payment was made. After checking this document the notary can sign the new title deed for the property which makes the deal legal. But this is not the end of the buying process because it has to be registered to make it public. The seller of the property have to sign a declaration for the income of the deal while the buyer must declare their new property at the Tax office of the municipality in order to start paying the inhabited house duty and the garbage collection fees. These are local taxes and fees different for every municipality in Bulgaria that are paid annually.

The help of a local lawyer is not obligatory for the real estate deals in Bulgaria. Nevertheless if you are not familiar with the process and the documents needed, it is advisable to use such services. Since the Bulgarian Constitutions forbids foreigners owning Bulgarian land, the foreign buyers use a law loophole and purchase the real estate by creating a company in the country. Thus they own the company, and the company owns the real estate. For the forming of the company the buyers usually use the help of a local lawyer and later when it comes to the deal, continue to rely on his services to check whether everything is fine with the documents for the purchase.

Yes foreigners can buy a land in Bulgaria, but with some restrictions depending where you come from.

Basically all foreigners can buy property provided it doesn’t come with land.

Since 1st January 2012 EU and EEA citizens are allowed to buy land in Bulgaria, following the expiry of the 5 year prohibition included in the Treaty of Accession of Bulgaria to the EU. This means that EU and EEA citizens can buy properties that comes with land, for instance, houses, apartments sold with gardens, plots of land within the settlement limits, commercial properties, offices etc.

Under the same treaty, since 1st January 2014 EU and EEA citizens can also buy agricultural land and forests in Bulgaria without restrictions.

All other foreigners are still under the prohibition of buying land in Bulgaria but are allowed to buy any property that comes without land, for instance apartments sold without ideal parts.

Non-EU or EEA citizens have the possibility to buy property without restrictions in Bulgaria provided they register a Bulgarian company.